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How serious is the U.S. government’s case against Volkswagen over the cheating diesel cars? It possibly turned much more serious today, according to a Wall Street Journal report that indicates the Justice Department will target the automaker with a far-reaching law previously used to go after big bank fraud.

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The Journal reported today that the U.S. has issued a subpoena under what’s called the the Financial Institutions Reform, Recovery and Enforcement Act, or “Firrea”, against VW.

That’s a big deal because the Firrea law allows the Justice Department’s civil attorneys to look back as far as 10 years, and to examine whether lenders themselves were harmed by the financing of VW’s cars—opening the automaker to potentially more penalties.

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The law was passed in 1989 as a response to the Savings and Loan crisis, and in recent years it was used to go after big banks during the mortgage securities meltdown. (I’m not going to sum that up for you, just go see The Big Short instead.)

Here’s more on what that means, from the paper’s story:

That is a novel use of the civil financial fraud law that the Obama administration deployed to extract record-setting multibillion-dollar settlements from big banks in the wake of the 2008 financial crisis.

It suggests the car maker faces another potential source of penalties after admitting it used illegal software that allowed diesel-powered vehicles to pollute more on the road than during government emissions tests.

Prosecutors also have used Firrea to probe alleged misdeeds in the auto loan industry, but the Volkswagen subpoena marks the first known instance of the government using a banking law to pursue potential wrongdoing that is not directly linked to financial misconduct.

This adds to VW’s many, many troubles in the wake of the Dieselgate scandal, which include fines and lawsuits—not to mention demands to bring hundreds of thousands of TDI diesels into compliance with the law as the matter drags into its sixth month.


Contact the author at patrick@jalopnik.com.